Tuesday, July 03, 2012

Commodities and QE: The CRB Just Formed a Final Three Year Cycle Low

Chart above shows the best entry point in the junior miners for the last two yeas. Double bottom is formed with Volume signal and a very strong reverse candle is marking the Second Low. MACD will produce the Buy signal with the next move up. Increased volume is the most encouraging signal here - nobody loves juniors any more - insiders are taking the positions in Real Hard Assets.

Now we have a brilliant analysis from Toby Connor on commodities space.

"Now FED Is To The Rescue - we will not survive another deflation.

"Any such operation means the QE up to the infinity whatever it will be called. The action will be coordinated and must be unleashed on a truly huge scale in order to attempt to save the insolvent financial system from "the run on the banks". Battle Field will be in Europe - now Europe threatens to push all world economy into another recession. UK - the land of the brave, where all experiments with QE were started first - is already in recession technically. Austerity will be dying hard, but the Paul Krugman is now the bedside book."

"As with our recent Call on Apple, nothing here will be scientifically proven - all our markets are rigged and are pure Esoteric Fiction now. Our feeling tells us that recent carnage in Gold and Gold miners, particularly, is the preparation to the Massive Liquidity Back Stop Operation."

"We highly recommend to all investors to read this book. This is what is coming.Paul Krugman describes the insolvent financial system with the honesty affordable only to Wall Street outsider. The FIAT system can survive only by expanding the monetary base further and keep the credit running. Claims will never be met, but surprisingly enough - it is not necessary - we all can just pretend that debt will be repaid one day and service the interest enough to keep Confidence in the status quo."

Kitco:

The CRB Just Formed a Final Three Year Cycle Low

I think it's clear by the action in the dollar index this morning and the response by risk assets in general, that the bottom I have been looking for is here.

Today will be the first day in a commodity rally that should last roughly 2 years topping in mid-to-late 2014 when the dollar puts in its next three year cycle low.

The next two or three weeks should produce an exceptionally violent rally from extreme oversold conditions followed by a consolidation period as the dollar bounces weakly out of its intermediate bottom and rolls over quickly signaling that its three year cycle has topped.

The last two three year cycle lows in 2006 and 2009 generated a 20% and 32% rally during the initial move out of their final low.

This is day one of what should be roughly a two year rally into a massive parabolic spike sometime in 2014.

Let me reiterate that the initial rally out of one of these major cycle lows is always extremely aggressive. Today you have a chance to get in on the first day of this initial move. Those that wait will end up chasing into overbought conditions very quickly.

As is often the case, gold sniffed out this bottom early in May. The rally today confirms that we have a daily cycle bottom in place and a new cycle beginning that should last 15-20 days before the next short-term correction.

Miners confirmed this major bottom with a 24% initial rally on huge volume. This should be a multi-year low that will not be violated until the secular bull comes to an end.

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Dedicated to all those brave men who have been fighting the bear market in 2000 and buying the dips without understanding that they were looking straight into the abyss. Do not trust your money in anybody, for you are the one who is going to be rich or poor, not those that are advising you: always do your DD. Disclosure: We are putting our money where our mouth is.